Question
You want to buy a bond with a face value of $1000, and an annual coupon of 8% paid quarterly. The annual market rate (the
You want to buy a bond with a face value of $1000, and an annual coupon of 8% paid quarterly. The annual market rate (the discount rate) is 10% now. This bond will mature in 10 years. The fair value of this bond today should be $
Assume the discount rate in year 2 goes down to 8%. All other info is the same. The fair value of this bond in year 2 is $
complete in this format:
| NPR |
| Coupon Rate |
| I/Y or Rate |
| PMT |
| PV |
| FV |
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To calculate the fair value of the bond we can use the present value formula Lets go through the cal...
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Step: 2
Step: 3
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Introduction to Operations Research
Authors: Frederick S. Hillier, Gerald J. Lieberman
10th edition
978-0072535105, 72535105, 978-1259162985
